WEBVTT 1 00:00:08.240 --> 00:00:14.679 You are listening to Redefining Energy. Your co hosts from Berlin Gerard Reed and 2 00:00:14.720 --> 00:00:21.719 from London Laurent Segala. Today on Redefining Energy, We're going to talk about 3 00:00:22.120 --> 00:00:29.239 China and to paraphrase Winston Churchill, a riddle rupped in the mystery inside an 4 00:00:29.399 --> 00:00:34.679 Enigma. But first award from our partner, Redefining Energy sponsored by a Mundi, 5 00:00:35.039 --> 00:00:39.799 the leading European asset manager, your trusted partner to accelerate the transition to 6 00:00:39.880 --> 00:00:45.799 a low carbon future. Leading asset manager based on the IPE ranking. Investing 7 00:00:45.880 --> 00:00:50.640 involves risk, consult your financial advisor. That is well said Laurent. That 8 00:00:50.759 --> 00:00:55.280 is well said. Great way to open up the podcast. China. It 9 00:00:55.359 --> 00:01:00.159 is the renewable king of the world in every way and you can't ignowre it. 10 00:01:00.880 --> 00:01:06.239 So we did a little minutes it's one nine two months ago, and 11 00:01:06.280 --> 00:01:10.079 we said we would bring a real expert. We have the real expert. 12 00:01:10.799 --> 00:01:14.840 Yeah, and I'm really looking forward to this conversation. Ron Our guest is 13 00:01:14.959 --> 00:01:19.439 David Fishman, is an American expert, but he's based in Shanghai. Of 14 00:01:19.480 --> 00:01:26.280 course, he is totally different in Mandarin and is part of a conceptancy called 15 00:01:26.359 --> 00:01:34.599 the Lantau Group Economic and Strategic Conceptancy with amazing knowledge of the energy space, 16 00:01:34.840 --> 00:01:40.319 absolutely phenomenal. Is the only guy who reads all the provincial statistic in Chinese. 17 00:01:41.439 --> 00:01:44.159 Well, let's bring him on the show. David. It's great to 18 00:01:44.200 --> 00:01:46.760 have you on the show. Thank you for having me. Well, David, 19 00:01:46.879 --> 00:01:49.719 you're in Shanghai, so you're in the thick of it, and we're 20 00:01:49.760 --> 00:01:53.680 going to talk about China and energy, which is such a great topic. 21 00:01:53.760 --> 00:01:57.040 But you know, first, up from the outside looking into China, we 22 00:01:57.079 --> 00:02:00.560 see Cole is going ups, are going up there gets their plants. There 23 00:02:00.560 --> 00:02:05.920 are provinces who are doing something, some kind of government doing something, subsidies, 24 00:02:05.959 --> 00:02:09.240 over capacity, market forces, common ecod any. First question, is 25 00:02:09.280 --> 00:02:14.479 there a pilot in the plane? I suppose that's a pretty fair question, 26 00:02:15.080 --> 00:02:19.080 considering maybe you get some mixed signals sometimes, but yeah, absolutely so, 27 00:02:19.719 --> 00:02:23.879 we've got a plane. It's flying in a direction. Now we know the 28 00:02:23.919 --> 00:02:29.000 direction because national policy tells us what direction the plane is flying, but a 29 00:02:29.039 --> 00:02:30.639 lot of the details maybe are a little bit fuzzy. You know, what 30 00:02:30.719 --> 00:02:34.719 is the altitude of the plane, what is the speed of the plane? 31 00:02:35.159 --> 00:02:38.800 Is it going at this bearing or that bearing? And so yeah, you 32 00:02:38.800 --> 00:02:43.080 can get some conflicting signals. Sometimes it's reasonable to say, from the outside 33 00:02:43.120 --> 00:02:46.080 looking in, maybe it looks like the plane doesn't have a pilot, so 34 00:02:46.159 --> 00:02:51.560 to speak. But there is a national strategy behind China's energy transition, and 35 00:02:51.680 --> 00:02:53.960 so yeah, the plane very much does have a pilot right up from the 36 00:02:54.000 --> 00:02:59.719 outside in. I find very interesting about the Chinese energy strategy is they seem 37 00:02:59.759 --> 00:03:05.120 to industrial policy, geopolitics. They look at a much broader sense than we 38 00:03:05.199 --> 00:03:08.319 do in the West. If I might say, that's fair to say Chinese 39 00:03:08.639 --> 00:03:14.360 climate policy or environmental policy, right, we talk about affecting an energy transition 40 00:03:15.000 --> 00:03:22.759 or creating some type of intentional movement in your energy systems or your electricity system. 41 00:03:23.039 --> 00:03:25.759 Of course that's a domestic choice. That's a domestic policy choice. When 42 00:03:25.800 --> 00:03:31.759 it comes to energy, it's kind of completely inextricably linked to international policy as 43 00:03:31.759 --> 00:03:38.039 well. If you want to have a domestic industry that's competent at building solar 44 00:03:38.120 --> 00:03:43.080 panels or electric vehicles or building ultra high voltage lines, right, you have 45 00:03:43.120 --> 00:03:46.840 to have an effective industrial policy. And if you're going to have effective industrial 46 00:03:46.879 --> 00:03:51.080 policy and you're trying to ramp up into technologies that maybe you didn't have a 47 00:03:51.120 --> 00:03:53.639 lot of expertise in before, or maybe you're cutting edge for the whole world, 48 00:03:53.800 --> 00:03:58.120 then you're also going to have to touch on geopolitics for sure. And 49 00:03:58.159 --> 00:04:00.280 where China is right now, of course, for capacity has been in the 50 00:04:00.280 --> 00:04:05.560 news a lot recently. We're talking about evs, we're talking about solar panels. 51 00:04:05.560 --> 00:04:11.000 That all becomes very sensitive topics. China is really really pushing its own 52 00:04:11.080 --> 00:04:16.319 domestic energy transition, and maybe a lot of people are reading that as intentional 53 00:04:16.959 --> 00:04:23.600 trade based attacks as well. It does seem like there's going to be surplus 54 00:04:23.600 --> 00:04:28.560 sometimes absolutely Now is that a problem that's up for you to decide personally? 55 00:04:29.040 --> 00:04:31.759 My own thought on clean technology is that as long as the world's still using 56 00:04:31.920 --> 00:04:38.360 fossil fuels, there can never be an oversupply of clean technology. But maybe 57 00:04:38.360 --> 00:04:42.000 that's a question for the trade folks rather than me. When we look at 58 00:04:42.040 --> 00:04:46.720 older developments, and of course twenty three was a record YEO for winds or 59 00:04:46.759 --> 00:04:50.519 our batteries, and to twenty four probably even more, the question while asking 60 00:04:50.560 --> 00:04:56.279 ourselves is how much is took down decided? But you see on how much 61 00:04:56.519 --> 00:05:01.279 is the consequences of market forces? They are the prices on what. It's 62 00:05:01.399 --> 00:05:05.399 just the markets. So how does it work? And that's a very fair 63 00:05:05.519 --> 00:05:11.160 question because it's been an evolution in the early years of China's wind and solar 64 00:05:11.279 --> 00:05:17.639 buildout that couldn't exist without extreme government participation, support, or you might even 65 00:05:17.680 --> 00:05:23.399 say interference with solar and wind buildout. That you have to be able to 66 00:05:23.399 --> 00:05:26.759 say to a wind or solar developer, if you build this, and look, 67 00:05:26.800 --> 00:05:29.399 I know it's expensive, I know capex is high, I know solar 68 00:05:29.399 --> 00:05:32.360 panel technology is expensive. But if you build this, I'll give you a 69 00:05:32.560 --> 00:05:36.240 very high feed in tariff, I'll give you subsidies, I'll give you everything 70 00:05:36.279 --> 00:05:41.120 that you want so that you can build this thing and be successful. And 71 00:05:41.160 --> 00:05:46.759 then over time those subsidies were pulled away, those very attractive feed in tarif 72 00:05:46.839 --> 00:05:50.639 rates were reduced, and starting around twenty twenty, the law of the land 73 00:05:50.720 --> 00:05:55.040 instead was hey, if you want to build, you better be able to 74 00:05:55.079 --> 00:05:58.279 do it at grid parity prices. You're not going to get a scent more 75 00:05:58.319 --> 00:06:01.199 than you would get as if you were a coal fire generator. And you 76 00:06:01.240 --> 00:06:06.519 know what happened. The renewable generator said okay, and they kept building because 77 00:06:06.560 --> 00:06:12.600 the market conditions have been evolving in such a way that they see the way 78 00:06:12.600 --> 00:06:16.079 to economic profits. They aren't being told to build anymore, or they're not 79 00:06:16.160 --> 00:06:21.879 being lured with very very attractive government carriots. But it's neither stick nor carrot. 80 00:06:23.279 --> 00:06:26.480 The government didn't create the stick or the carrot in this case. At 81 00:06:26.480 --> 00:06:30.959 this point, China has built a power market, has built a power market 82 00:06:30.959 --> 00:06:36.680 that is able to incentivize renewable builders to construct projects that they know we're going 83 00:06:36.720 --> 00:06:42.079 to earn acceptable revenues on the basis of just market forces, that they're going 84 00:06:42.120 --> 00:06:45.959 to earn enough money in an open market, in a merchant market, so 85 00:06:46.000 --> 00:06:47.920 that they want to build. And in the last couple of years, twenty 86 00:06:47.959 --> 00:06:51.839 twenty three huge numbers, twenty twenty four looking like it's going to be a 87 00:06:51.879 --> 00:06:57.560 huge year also, all of that really being driven by builders seeing that they 88 00:06:57.600 --> 00:07:00.120 can make money by building these projects, by build than wind and solar farms. 89 00:07:00.879 --> 00:07:03.319 David, I just wanted to ask you a little bit about the demands 90 00:07:03.319 --> 00:07:08.519 side. If I'd look at Europe or North America where we just have electricity 91 00:07:08.560 --> 00:07:13.000 demand flat, talking a little bit about that power consumption is still growing like 92 00:07:13.079 --> 00:07:15.879 crazy in China. We saw in March, which is the most recent month 93 00:07:15.920 --> 00:07:18.920 I looked at March twenty twenty four, it was up a seven percent year 94 00:07:18.959 --> 00:07:24.160 on year. These are the numbers that you would see from a developing economy. 95 00:07:24.439 --> 00:07:28.240 And when you see the rate at which China is adding power consumption, 96 00:07:28.319 --> 00:07:31.160 it really underlines the fact that China often tries to make that we are still 97 00:07:31.240 --> 00:07:34.959 but developing economy, that we have not matched out our potential. When you 98 00:07:35.000 --> 00:07:41.360 look at the per capita consumption of electricity across the country and you compare that 99 00:07:41.439 --> 00:07:46.480 to OECD nations, we're looking at much much lower levels. And then remember 100 00:07:46.519 --> 00:07:49.439 a lot of that includes industrial electricity consumption. You strip that out and you 101 00:07:49.560 --> 00:07:56.959 just look at how Chinese people consume electricity compared to how European people or American 102 00:07:56.959 --> 00:08:00.759 people households. It's a fraction, it's like a fourth. They use so 103 00:08:01.079 --> 00:08:05.720 little electricity in Chinese households compared to their peers in developed nations around the world. 104 00:08:07.160 --> 00:08:09.439 And so that's how China can still have five percent, six percent, 105 00:08:09.519 --> 00:08:15.600 seven percent consumption growth every single year. And that's what really highlights how difficult 106 00:08:15.600 --> 00:08:20.959 it is to be able to affect an energy transition when they're trying to cap 107 00:08:20.079 --> 00:08:24.360 how much coal they use. Trying to tap emissions but also keep growing the 108 00:08:24.439 --> 00:08:28.360 pie. They need to stop how much coal is in the context of the 109 00:08:28.360 --> 00:08:31.840 overall pie, but still allow the pie to keep growing at six or seven 110 00:08:31.879 --> 00:08:35.399 or eight percent every year. Author economies they only have to do with one 111 00:08:35.440 --> 00:08:39.240 issue. They're swapping, right, They say, we take the carbon intensive 112 00:08:39.360 --> 00:08:43.519 electricity that we have, we take the fossil fuels in our oil and gas 113 00:08:43.559 --> 00:08:48.320 in our transportation sector. Can we swap it out? Great? China is 114 00:08:48.440 --> 00:08:52.639 trying to both swap and grow and ensure that the stuff that's growing is also 115 00:08:52.840 --> 00:08:56.720 cleaner. It's a massive, massive challenge in terms of CRISI market, which 116 00:08:56.759 --> 00:09:03.639 is something we are very attuned to in the US. So all the markets, 117 00:09:03.759 --> 00:09:07.919 like by province, is their national market. How does it work? 118 00:09:07.840 --> 00:09:15.559 Chinese power sector is mostly unbundled. So you have generators and they do their 119 00:09:15.600 --> 00:09:18.080 thing. You've got transmission distribution companies, the grid company, they do their 120 00:09:18.080 --> 00:09:22.759 thing, and then you've got the retail what we call maybe the utility in 121 00:09:22.799 --> 00:09:26.320 the West, and they sell electricity to power consumers. These have mostly been 122 00:09:26.360 --> 00:09:31.840 split out now in China. So you've got your three separate sectors generation, 123 00:09:31.080 --> 00:09:37.279 transmission, and retail and then every single province has its own local grid, 124 00:09:37.600 --> 00:09:43.000 and so it will have local generators, local transmission, and local consumers. 125 00:09:43.039 --> 00:09:48.080 But then each provincial grid is part of a regional grid. So each regional 126 00:09:48.159 --> 00:09:50.919 grid will have maybe four or five provinces, and they're kind of loosely linked 127 00:09:50.960 --> 00:09:54.200 to each other. They have interconnection. You can compare it maybe to like 128 00:09:54.200 --> 00:10:00.000 an RTO in the United States, but then on a national basis or across 129 00:10:00.120 --> 00:10:05.440 regional basis, very weak interconnections. So China's got a total of six regional 130 00:10:05.440 --> 00:10:07.320 grids. One of them is kind of an island all by itself, that's 131 00:10:07.399 --> 00:10:11.879 china Southern Grid down in the south. And then the other five regional grids 132 00:10:11.320 --> 00:10:15.279 they talk to each other a little bit. Maybe they can send some power 133 00:10:15.279 --> 00:10:18.519 across country with high voltage lines something like that, but maybe it's better to 134 00:10:18.559 --> 00:10:22.440 think of themselves as big islands. And so that's the current state of Chinese 135 00:10:22.480 --> 00:10:26.879 power markets. You've got power trading happening, You've got buying and solving electricity 136 00:10:26.919 --> 00:10:33.440 from generators to transmission to retailers, and it's happening mostly on a provincial level, 137 00:10:33.600 --> 00:10:35.440 a little bit on a regional level, and only in kind of a 138 00:10:35.519 --> 00:10:41.279 supplementary sense on a cross regional level. Can I specifically ask you about one 139 00:10:41.320 --> 00:10:46.360 technology and that's solar? And if I just look at the solar installs in 140 00:10:46.440 --> 00:10:48.200 China last year, I think there were two hundred and sixty gig and wants 141 00:10:48.240 --> 00:10:52.080 something like that, but that was more that was installed in the whole world 142 00:10:52.159 --> 00:10:56.360 the year before. And those numbers are just so big. I just sort 143 00:10:56.360 --> 00:11:00.240 of scratched my head and said, what how many years can they keep roll 144 00:11:00.360 --> 00:11:03.679 at that level? Right? And on the top of that, and that's 145 00:11:03.679 --> 00:11:07.039 why we're glad to have you on the show. You have to figure out 146 00:11:07.080 --> 00:11:11.240 that there was a gap in trucking electricity because they don't even count the sol 147 00:11:11.360 --> 00:11:16.080 hooftop, and that's something that you pointed out recently on social media, So 148 00:11:16.559 --> 00:11:22.200 job it even goes further than you think because they don't count so hooftops and 149 00:11:22.240 --> 00:11:28.120 small installation. Probably start with that and then comment more generally when you look 150 00:11:28.159 --> 00:11:33.759 at what's out there for solar. What's really notable about China is how massive. 151 00:11:33.799 --> 00:11:35.159 Yeah, sotally two hundred and fifty gigawats of one year, and you 152 00:11:35.159 --> 00:11:39.759 know half of that's distributed solar rooftops. Now, so you've got your massive 153 00:11:39.879 --> 00:11:45.519 utility scale projects, just deserts full of solar panels out in the Gobi Desert 154 00:11:45.559 --> 00:11:48.080 in the western half of the country, and then you've got one hundred giga 155 00:11:48.080 --> 00:11:52.879 wants are more of rooftop solar panels in the eastern part of the country where 156 00:11:52.960 --> 00:11:58.360 land is scarce and at a high premium, and building on rooftops makes a 157 00:11:58.360 --> 00:12:01.759 whole lot of sense. Even if the solar array dance isn't great in that 158 00:12:01.840 --> 00:12:05.240 part of the country, it more than makes up for itself on the basis 159 00:12:05.320 --> 00:12:09.559 of the rooftops being available and land being very scarce and expensive and not so 160 00:12:09.639 --> 00:12:13.159 available. So yeah, they're building tons and tons of solar on rooftops. 161 00:12:13.519 --> 00:12:16.440 A lot of these projects. I mean we're talking small projects, right. 162 00:12:16.519 --> 00:12:18.879 It's easy sometimes that they might not even be counted in the overall totals, 163 00:12:18.919 --> 00:12:24.440 and especially a lot of their generation. Because of the way China's National Bureau 164 00:12:24.480 --> 00:12:28.840 Statistics tracks generation, it has to have a cutoff point. You can't be 165 00:12:28.960 --> 00:12:33.399 hoping on a monthly basis to collect all of your statistics from what at this 166 00:12:33.440 --> 00:12:39.480 point are probably tends to hundreds of thousands of individual projects. And so they 167 00:12:39.559 --> 00:12:41.879 have a cut off point and they just say projects that make less than this 168 00:12:41.919 --> 00:12:46.000 amount of money, they're just not tracked in the statistics, and they make 169 00:12:46.039 --> 00:12:48.039 it up. At the end of the year, they do a more thorough 170 00:12:48.080 --> 00:12:50.240 survey and they try to understand what they actually have out there. But on 171 00:12:50.320 --> 00:12:54.320 any given month, when they say we got this much generation from our solar 172 00:12:54.440 --> 00:12:58.240 in this month, it's more. It's always more because they're missing a bunch 173 00:12:58.240 --> 00:13:03.000 of their smaller, you know, the rooftop solar projects. And then how 174 00:13:03.080 --> 00:13:05.799 long can they keep it up. They've clearly got the capacity to build the 175 00:13:05.840 --> 00:13:11.120 panels, they've clearly got the workforce to install the panels. These are actually 176 00:13:11.159 --> 00:13:16.799 some of the bottlenecks that other country's experience. They've clearly got the will from 177 00:13:16.039 --> 00:13:20.919 the builders to keep building because they still see a path to profits by building 178 00:13:20.960 --> 00:13:26.039 these projects. So how long can they keep building it? Well, the 179 00:13:26.159 --> 00:13:28.840 real thing they're going to run into is not the will of the builders or 180 00:13:28.840 --> 00:13:33.039 some supply chain issues. They're going to run into grid stability issues when you 181 00:13:33.080 --> 00:13:39.639 build that much intermittent generation entering into your system all at the same time, 182 00:13:39.720 --> 00:13:43.000 and it's solar, so it all goes away at night and it all gets 183 00:13:43.000 --> 00:13:46.120 affected when the sun goes behind a cloud all of a sudden. You've got 184 00:13:46.120 --> 00:13:52.440 a system that's really, really reliant on a highly intermittent generator, and so 185 00:13:52.519 --> 00:13:54.480 what do you have to do to keep that up with that? You've got 186 00:13:54.480 --> 00:13:58.559 to build more transmission and distribution lines. You have to build more flexible generators, 187 00:13:58.639 --> 00:14:03.840 load following generators that can keep up with them. We're talking flexible coal, 188 00:14:03.879 --> 00:14:07.919 We're talking gas turbines, pumped hydro storage, battery storage, demand response 189 00:14:09.039 --> 00:14:11.440 systems. You have to build a market that actually allows all of those things 190 00:14:11.440 --> 00:14:15.639 to function. You need an insular services market, you probably need a demand 191 00:14:15.720 --> 00:14:18.440 response market, you probably need a capacity market. You need to build all 192 00:14:18.480 --> 00:14:22.279 of these things, and then of course the physical infrastructure. If any of 193 00:14:22.320 --> 00:14:26.399 those things lag behind the actual build out of the solar, then solar has 194 00:14:26.440 --> 00:14:30.600 to slow down, right, It just can't, because you're now you're endangering 195 00:14:30.679 --> 00:14:35.080 grid stability. So that's actually the answer to the question, how can they 196 00:14:35.159 --> 00:14:37.240 keep it up or what kind of circumstances would allow them to not keep it 197 00:14:37.320 --> 00:14:41.919 up. That's what would do it. All the supporting systems failing to keep 198 00:14:41.960 --> 00:14:46.320 pace, which means that you introduce flexibility, which is a subject which is 199 00:14:46.480 --> 00:14:52.279 very close to our part right now. And I guess it's probably easier in 200 00:14:52.360 --> 00:14:58.000 China than elsewhere because you get your cattle and you'll bid which are already present, 201 00:14:58.480 --> 00:15:01.759 and then a huge umpt fleet, probably one of the biggest in the 202 00:15:01.799 --> 00:15:07.440 world. Those flexibility mechanism you talk about on serious services, do they stand 203 00:15:07.480 --> 00:15:11.440 on their feets or it's more of a common control or how do they develop 204 00:15:11.440 --> 00:15:16.399 as fast? Because I think we had what ten ge get out of batteries 205 00:15:16.480 --> 00:15:20.679 into a twenty three, which is pretty phenomenon. Yeah, So all of 206 00:15:20.720 --> 00:15:26.679 these are just like the power energy system itself, the markets that are going 207 00:15:26.759 --> 00:15:31.320 to support this, the ancillary services market is also developing into a proper market. 208 00:15:31.679 --> 00:15:35.799 When we talk about how we want to compensate load followers for load following, 209 00:15:35.799 --> 00:15:41.200 how do we want to compensate capacity for being available. They're moving slowly 210 00:15:41.279 --> 00:15:45.799 from this kind of idea of mechanisms where just like I passed costs to you, 211 00:15:46.080 --> 00:15:48.879 thank you for being their coal generator, I will give you this much 212 00:15:48.919 --> 00:15:52.320 money for doing that, And that's the first stage, and then you want 213 00:15:52.360 --> 00:15:56.039 to see in a year or two or three that turn into a market where 214 00:15:56.080 --> 00:16:00.679 you say battery, you're now competing against the coal generator, compete against the 215 00:16:00.679 --> 00:16:04.639 pumped hydro power storage plant. Whoever can supply this capacity at the best price 216 00:16:06.000 --> 00:16:08.879 wins the right to get these capacity payments. And if you can't do it, 217 00:16:08.960 --> 00:16:11.960 you have to exit the system. That's where we're moving, and so 218 00:16:12.080 --> 00:16:19.440 that's how you incentivize eventually capacity to build or exit the market. Where they 219 00:16:19.480 --> 00:16:23.600 are right now, they're trying to just get the load followers. They're trying 220 00:16:23.600 --> 00:16:26.240 to just get the capacity built, and the best way to do that is 221 00:16:26.240 --> 00:16:30.080 give them guaranteed payments. A coal capacity charge was added at the end of 222 00:16:30.120 --> 00:16:34.240 twenty twenty three. That made sense in the moment. I think that still 223 00:16:34.279 --> 00:16:37.399 makes sense in twenty twenty four. Eventually, I'd want to see that turn 224 00:16:37.440 --> 00:16:42.559 into a market competitive mechanism instead of a guaranteed payment. I'd like to see 225 00:16:42.679 --> 00:16:45.840 a pump hydro competing with them. I think pump hydro would probably compete very 226 00:16:45.840 --> 00:16:52.000 effectively against coal generators when it comes into a market like that. The flexibility 227 00:16:52.080 --> 00:16:56.759 upgrades and the flexibility investments that China is making right now are really kind of 228 00:16:56.799 --> 00:17:02.639 pioneering in the whole world. What they are required to build and do to 229 00:17:02.720 --> 00:17:10.680 make sure that they're incredibly high intermittent generation exposed system is going to function or 230 00:17:10.720 --> 00:17:15.000 even have a hope of functioning well. They're really required to pioneer what they 231 00:17:15.000 --> 00:17:18.920 do with flexibility, how much battery is, how much pump storage, how 232 00:17:18.000 --> 00:17:22.519 much, how even they have their coal plants operate. They operate coal plants 233 00:17:22.559 --> 00:17:27.039 flexibly in China, not a lot of other countries do that. Everything that 234 00:17:27.079 --> 00:17:32.400 they're doing is in service of this reality. They're going to have to face 235 00:17:32.480 --> 00:17:37.079 a reality where wind and solar are the dominant capacity forms in their system. 236 00:17:37.200 --> 00:17:40.880 David, I like the word to use pioneering because the other area that where 237 00:17:40.960 --> 00:17:44.680 China is pioneering is in the electrication of transport. And I don't mean just 238 00:17:45.000 --> 00:17:48.359 cars. I'm talking about buses, I'm talking about scooters. You know, 239 00:17:48.400 --> 00:17:53.400 we see this massive build out of electric charging infrastructure on and on SOUSE. 240 00:17:53.400 --> 00:17:56.720 You're talking a little bit about that as well, and how this fits into 241 00:17:56.720 --> 00:18:00.799 this whole energy transition. Twenty twenty three was a huge year for evs. 242 00:18:00.839 --> 00:18:03.799 Looks like twenty twenty four is going to continue to be massive. I think 243 00:18:03.839 --> 00:18:07.240 I saw statistic recently that said over the first quarter of the year, maybe 244 00:18:07.440 --> 00:18:11.960 fifty percent of all the vehicles in China sold were EV's, which is massive. 245 00:18:11.400 --> 00:18:15.519 Believe really get percent. I believe that's the number I saw, and 246 00:18:15.559 --> 00:18:19.599 so like, how do we get that? Obviously, it's really helpful that 247 00:18:19.720 --> 00:18:23.000 you started from a place of electric scooters. And it sounds silly, but 248 00:18:23.039 --> 00:18:27.519 I think it really is true that you had such this kind of understanding and 249 00:18:27.599 --> 00:18:33.240 awareness that electric powered mobility is not a weird, niche application. It's just 250 00:18:33.319 --> 00:18:37.599 a normal thing. It's just a normal part of life. Chinese cities have 251 00:18:37.720 --> 00:18:42.559 had electric mopeds, electric scooters and people getting around using that as their primary 252 00:18:42.559 --> 00:18:47.319 transports for decades. And you go to the countryside, of course, and 253 00:18:47.359 --> 00:18:51.279 you know you have range considerations and people drive motorcycles. But in the cities 254 00:18:51.319 --> 00:18:53.759 Shanghai, Beijing, other major cities like that, just tons of electric scooters 255 00:18:53.839 --> 00:18:57.240 everywhere, and you know, maybe there's this part of that also where they 256 00:18:57.559 --> 00:19:06.680 don't necessarily have this cultural historical association with like the macho car culture though the 257 00:19:06.759 --> 00:19:11.400 electric vehicles where maybe sometimes they're rejected in the West as being like representative of 258 00:19:11.440 --> 00:19:17.960 a lifestyle that it's not me and China electric vehicles are like cool the future, 259 00:19:18.480 --> 00:19:21.279 forward looking, trendy, that kind of thing. It's just it's got 260 00:19:21.279 --> 00:19:25.319 this totally different cultural connotation, which is obviously really helpful for their adoption. 261 00:19:26.079 --> 00:19:29.839 And beyond that, of course, the electric vehicle companies are domestic. If 262 00:19:29.880 --> 00:19:33.680 you buy electric, you're buying domestic. You're a patriotic consumer tesla of course. 263 00:19:33.720 --> 00:19:37.640 But all the other major electric vehicles companies are Chinese, and surely that 264 00:19:37.680 --> 00:19:42.200 also plays a role that certainly helps. There are two elements which for me 265 00:19:42.640 --> 00:19:49.440 are the most important, even more than decombonization or digitization. The number one 266 00:19:49.480 --> 00:19:55.319 is human capital, because you can't put an energy policy if you don't have 267 00:19:55.440 --> 00:20:00.599 human capitalal and you have seen company which did not exists, oh well nowhere 268 00:20:00.599 --> 00:20:07.640 in the radar ten years ago, whether it's BYD cattalev Gatun that's for the 269 00:20:07.680 --> 00:20:14.720 batteries, Minyang gold Wing for the wind and they are the same policy in 270 00:20:14.759 --> 00:20:18.160 Brazil in India. Where are those Brazilian and Indian champions? I don't see 271 00:20:18.160 --> 00:20:22.759 them anywhere, but I see those Chinese technology everywhere. So probably took about 272 00:20:22.799 --> 00:20:27.839 the human capital before all these top down plants, which frontly means nothing if 273 00:20:27.839 --> 00:20:33.880 you're not have entrepreneur behind them. Yeah, it's not that industrial policy is 274 00:20:33.880 --> 00:20:37.960 a great mystery. Many countries can institute an industrial policy, and they could 275 00:20:38.000 --> 00:20:42.400 even maybe assign government funding and grants to back up that policy. But at 276 00:20:42.400 --> 00:20:45.559 the end of the day, the people carrying it out are your engineers, 277 00:20:45.599 --> 00:20:52.240 your STEM graduates, your innovators, and your scientists, your experimenters. Two 278 00:20:52.319 --> 00:20:56.559 decades ago, three decades ago, China manufactured exactly what it was able to 279 00:20:56.599 --> 00:21:00.559 manufacture because that's what it's human capital base was able to to create. And 280 00:21:00.599 --> 00:21:06.839 now when you look at how many master's degrees and PhDs and chemical and material 281 00:21:06.920 --> 00:21:11.240 and electrical engineering graduate every year from Chinese university, that there's millions of them. 282 00:21:11.720 --> 00:21:18.400 Any problem in China that can be solved by throwing a thousand PhDs and 283 00:21:18.720 --> 00:21:23.799 a billion yen at the problem will be fixed that way. We want to 284 00:21:23.839 --> 00:21:29.359 innovate a new application in this car company, Let's just keep throwing smart people 285 00:21:29.400 --> 00:21:32.559 and lots of money at the problem until it fixes itself. We don't know 286 00:21:32.559 --> 00:21:37.000 how to localize nuclear technology components. Keep throwing smart people and money at the 287 00:21:37.039 --> 00:21:41.319 problem until it sorts itself out. And China has the money and the people 288 00:21:41.960 --> 00:21:45.599 that has the steen graduates to fix it that way, to approach problems like 289 00:21:45.640 --> 00:21:48.200 that, that's a real luxury. Not everybody gets to do that, and 290 00:21:48.319 --> 00:21:55.440 especially a lot of countries that see their human capital go elsewhere. But China 291 00:21:55.440 --> 00:22:00.319 has been very proactive and very methodical about trying to ensure, especially in the 292 00:22:00.400 --> 00:22:04.680 last few years, that it's human capital stays or if it goes away, 293 00:22:06.160 --> 00:22:10.240 it comes back. Also, if you went to a top university abroad and 294 00:22:10.279 --> 00:22:11.880 you want to come back to China to work, they'll give you a house, 295 00:22:12.319 --> 00:22:15.799 they'll make sure your kids go to private schools, they'll make sure you 296 00:22:15.799 --> 00:22:19.400 have you have state fundings that you can pursue your research, all this stuff. 297 00:22:19.799 --> 00:22:23.759 Here's a great story. I encountered a taxi driver in Shanghai. He 298 00:22:23.880 --> 00:22:26.680 said, oh, you're from the United States, so that's interesting. My 299 00:22:26.720 --> 00:22:30.440 son went to Stanford. Oh wow, good for you. Your son went 300 00:22:30.480 --> 00:22:32.000 to Stanford. How do you do that? He goes, Oh, the 301 00:22:32.079 --> 00:22:34.519 Chinese Academy of Science is paid for it. Why did they do that? 302 00:22:34.559 --> 00:22:37.240 He said, well, he wanted to study abroad, he applied, he 303 00:22:37.279 --> 00:22:41.240 got accepted to Stanford, and then after they said, okay, as long 304 00:22:41.279 --> 00:22:45.519 as you promised to come back to China after you graduate, We'll pay for 305 00:22:45.599 --> 00:22:49.359 everything. You do your master's degree, you do your PhD in Stanford, 306 00:22:49.400 --> 00:22:52.599 but you have to come back in China and work here when you're done. 307 00:22:52.839 --> 00:22:55.680 And so he took it and he went he said, yeah, my son, 308 00:22:55.920 --> 00:22:59.759 he works in Chinese Academy of Sciences. Now he had his full scholarship 309 00:22:59.759 --> 00:23:04.400 paid stand for it. Because China saw it was worthwhile to invest in this 310 00:23:04.599 --> 00:23:08.880 single human and then apply that to thousands or tens of thousands of people. 311 00:23:10.119 --> 00:23:14.119 It's a very intentional strategy. The other aspect, because I said, there 312 00:23:14.119 --> 00:23:18.200 War two. The one was human capital, but the you know one is 313 00:23:18.359 --> 00:23:22.079 energy security, which is something that we felt in Europe with the invasion of 314 00:23:22.359 --> 00:23:26.640 Ukraine, but they don't feel in the US thanks to the shade gas revolution. 315 00:23:27.279 --> 00:23:32.039 So they don't understand or they probably forgot because they had the energy in 316 00:23:32.079 --> 00:23:36.279 security twenty years ago. But in the mind of China, i'ving to import 317 00:23:36.279 --> 00:23:41.880 twenty million barial level per day and this is really not even decreasing. That's 318 00:23:41.920 --> 00:23:47.079 a huge level for all this energy transition. Yeah. Absolutely. I always 319 00:23:47.160 --> 00:23:52.200 like to talk about the two themes of China's energy sector or the energy transition 320 00:23:52.319 --> 00:23:56.039 one is decarbonization, which is ongoing, and the other is liberalization, which 321 00:23:56.079 --> 00:24:00.400 is also ongoing. But then there's actually a third theme always lurking, and 322 00:24:00.400 --> 00:24:06.799 that's energy security, and the other two can be sacrificed in a heartbeat if 323 00:24:06.839 --> 00:24:12.279 it looks like energy security would be compromised because of the pursuit of decarbonization or 324 00:24:12.400 --> 00:24:18.960 liberalization. Energy security is one of those kind of red lines in China, 325 00:24:18.000 --> 00:24:22.759 along with food security, along with national security. Right there's certain red lines 326 00:24:22.759 --> 00:24:26.039 in China, and energy security is one of them. Because when you talk 327 00:24:26.119 --> 00:24:29.759 about a place like up north where it's very, very cold in the winter 328 00:24:29.839 --> 00:24:32.880 and if you can't get enough electricity to be heating homes, or if you 329 00:24:32.920 --> 00:24:36.279 can't get enough heating fuel to heat homes and people, you know, people 330 00:24:36.279 --> 00:24:40.319 freeze to death. Or in the south where China is basically tropical, and 331 00:24:40.400 --> 00:24:44.559 if you can't get cooling in the summer, then again you're talking about human 332 00:24:44.640 --> 00:24:49.240 livelihood being affected. Energy security always takes precedence, and that really plays out 333 00:24:49.279 --> 00:24:53.640 in how we see a lot of investment decisions happening in China. So if 334 00:24:53.640 --> 00:24:59.319 I contrast to a place like Texas or cot is a very specific special kind 335 00:24:59.319 --> 00:25:03.839 of grid system. And you could summarize the way ERCOT operates by saying, 336 00:25:03.200 --> 00:25:08.200 the ideal type of electricity system is one that has just enough power just in 337 00:25:08.279 --> 00:25:12.440 time, and if you have any more than that, you've been economically inefficient, 338 00:25:12.480 --> 00:25:15.279 you've been wasteful. Okay, fine, that's one way of looking at 339 00:25:15.279 --> 00:25:18.319 the world. China clearly has a different way of looking at the world. 340 00:25:18.400 --> 00:25:23.519 It's more than enough power all the time. That's how China approaches energy security. 341 00:25:23.920 --> 00:25:30.599 Will never flirt with insufficiency for the sake of economic efficiency. There will 342 00:25:30.640 --> 00:25:34.319 always be sufficient power. David, I just have one question, is I'm 343 00:25:34.319 --> 00:25:40.079 gonna put you on the spot, when do Chinese combon emissions peak? Well? 344 00:25:40.279 --> 00:25:44.599 And the official number is twenty thirty, and there's a lot of good 345 00:25:44.599 --> 00:25:47.599 evidence stacking up right now to say that it's going to be before that. 346 00:25:48.000 --> 00:25:51.119 It's going to be well before that, And here we are in twenty twenty 347 00:25:51.119 --> 00:25:56.440 four. I think it's not too aggressive to say that twenty twenty four is 348 00:25:56.440 --> 00:25:57.599 the year. Now, we won't know until the end of the year. 349 00:25:57.920 --> 00:26:00.720 If they flatten out this, then we get to point back at twenty twenty 350 00:26:00.759 --> 00:26:04.359 three and we say twenty twenty three was the peak in twenty twenty four was 351 00:26:04.400 --> 00:26:07.880 the start of the plateau, or hopefully we start declining. I don't dare 352 00:26:07.920 --> 00:26:11.720 to say how quickly they'll decline, but there's a lot of not just me, 353 00:26:11.920 --> 00:26:17.000 a lot of people out there looking at the structure of the Chinese electricity 354 00:26:17.039 --> 00:26:19.480 consumption and saying, structurally, it looks like twenty twenty four has to be 355 00:26:19.519 --> 00:26:23.000 the year. And I certainly hope that that's true, that this is the 356 00:26:23.079 --> 00:26:29.000 year when all the renewables plus hydropower showing up and performing the way it's supposed 357 00:26:29.039 --> 00:26:33.599 to, all combine to ensure that the extra consumption that happens in twenty twenty 358 00:26:33.640 --> 00:26:38.839 four is fully met, or at least mostly met by enough clean generation, 359 00:26:40.039 --> 00:26:41.480 enough clean power, so that we can point back to it and say, 360 00:26:41.480 --> 00:26:45.839 look, coal, no additional call was consumed in twenty twenty four. That 361 00:26:45.880 --> 00:26:48.599 was the peak six years in advance, and then we can start working on 362 00:26:48.640 --> 00:26:52.960 the decline. Well, David, thank you so much for coming on the 363 00:26:52.000 --> 00:26:56.480 show. Thank you so much for this optimistic message, which I kind of 364 00:26:56.519 --> 00:27:02.440 share because there's never enough over precity of team tech in this world full of 365 00:27:02.440 --> 00:27:06.079 fussil fuel. Thank you so much for coming on the show. Thank you 366 00:27:06.279 --> 00:27:10.000 very much, David. And again I also on a backup at Lauren says 367 00:27:10.279 --> 00:27:14.400 we look at China, I think very negatively and I like the way you 368 00:27:15.000 --> 00:27:18.160 and this which is can be commissions is very close to Thank you guys. 369 00:27:18.200 --> 00:27:23.839 Ben Afli here. Wow wow, wow, I learned so much. Yeah, 370 00:27:23.920 --> 00:27:27.680 well, listen. The most amazing thing for me, Lauran is that 371 00:27:27.720 --> 00:27:34.680 the people still have a backdated, old worldview of China and what they're doing. 372 00:27:34.960 --> 00:27:40.200 And obviously there's a lot of negative press in and around China, Russia 373 00:27:40.240 --> 00:27:42.440 getting together, etcetera, etcetera. And it's not we're not going to go 374 00:27:42.480 --> 00:27:48.279 to politics, but you just can't ignore the elephant in the room, especially 375 00:27:48.319 --> 00:27:52.359 the energy space, and it's China. If you look at the response from 376 00:27:52.440 --> 00:27:57.400 the West, the US immediately very protection East and raising tariff full of the 377 00:27:57.440 --> 00:28:02.279 place. Europe is in the middle. They don't know, they have a 378 00:28:02.279 --> 00:28:07.960 bit of a collaboration slash soft protectionism with the Siabam. Europe still doesn't know 379 00:28:07.000 --> 00:28:11.119 where to stand. It's tough. It's really tough. Thlough. If you 380 00:28:11.119 --> 00:28:15.920 think the Europe's policy over the last seventy five years since the Second World War 381 00:28:15.079 --> 00:28:22.279 is is make sure you do business with your enemies, because if you can 382 00:28:22.359 --> 00:28:25.960 do business with your enemies, you're less likely to have trouble with them in 383 00:28:25.960 --> 00:28:29.920 the future. And that's philosophy and policy has worked very, very very well. 384 00:28:29.960 --> 00:28:33.680 But obviously since the Ukrainian crisis that's broken down. Yeah, one of 385 00:28:33.720 --> 00:28:40.440 the elements is gonna be determinant in Europe is the fact that the current account 386 00:28:40.480 --> 00:28:45.119 balance of Germany with China, we used to have a sizeable surplus for decades 387 00:28:45.640 --> 00:28:49.519 now is going into a deficit. So we might see some more stringent policy 388 00:28:49.599 --> 00:28:55.440 coming in Europe, which is sad because competition is good. Well, do 389 00:28:55.480 --> 00:28:57.200 you know what I think? We just have to face the fact that what 390 00:28:57.279 --> 00:29:03.920 the Chinese have done over the last twenty years is incredible, and that starts 391 00:29:03.960 --> 00:29:08.720 with their investment and education, all the way down to taking risks in and 392 00:29:08.759 --> 00:29:14.480 around, going into areas before I'm talking about growth, areas before other countries 393 00:29:14.519 --> 00:29:17.599 have dollars. That's the reality of it. So the question we should ask 394 00:29:17.599 --> 00:29:22.960 ourselves in Europe and in North America is what can we learn from their progress 395 00:29:22.039 --> 00:29:27.519 in the last twenty years. Well, job, we could talk about China 396 00:29:27.559 --> 00:29:33.160 for the next hour, but I really advise our listeners to go into the 397 00:29:33.240 --> 00:29:40.319 LinkedIn page of Davich Fishman because you have a lot of fascinating analysis and we 398 00:29:40.799 --> 00:29:45.319 thank Amunji for supporting our show. Absolutely, it's a good way to end 399 00:29:45.400 --> 00:29:48.720 up my friend. Last thing for anybody who wants to partner with us, 400 00:29:48.799 --> 00:29:53.279 we have a media kit at your disposal or just send us a main and 401 00:29:53.319 --> 00:29:56.720 we'll provide you with the media kit. A job. I talk to you 402 00:29:56.759 --> 00:30:06.240 next week, looking forward to it. Thank you for listening to Redefining Energy. 403 00:30:06.680 --> 00:30:11.160 Don't forget to rate the show and subscribe on Apple Podcasts, Spotify or 404 00:30:11.200 --> 00:30:12.960 the platform of your choice.